Chad T. Wilson, For the Express-News
April 26, 2023
Updated: May 1, 2023 4:05 p.m.
Chad Wilson Commentary: Financial turmoil puts property insurance claims at risk
How did we get here?
We are all feeling the effects of high inflation and the stock market decline. If your home or business is damaged by a storm, those financial forces may result in a low settlement offer, or your claim being denied.
As an attorney representing businesses and homeowners who must fight large insurance companies, I can attest this is an all-too-common occurrence. With financial pressures increasing, I foresee a corresponding increase in denied property damage claims.
Property owners should review their policies every year and be ready for the storms ahead and potential battles with their insurance companies to get valid claims paid. If you are uncertain what effect endorsements have, write your agent and have them explain it.
Why is claim underpayment and claim denial likely to get worse?
The recent news of large bank failures has been a crash course for many on how banks make money. They take deposits, make loans and invest money in stocks and bonds. U.S. Treasury bonds are considered one of the safest investments in the world, but when interest rates rise, the value of those bonds decreases. With the value of stocks and bonds down, banks have a weaker balance sheet.
Your insurance company works largely the same way. Premiums are collected, that money is invested and the returns on that investment pay out claims. With stocks and bonds down, the only thing insurance companies can control is the amount they pay in claims. Claim denials are profitable and happen even when the economy is strong.
After a storm, many homeowners are faced with damage to their homes and file an insurance claim to make repairs. What should be a simple and straightforward process is often frustrating and confusing. Claims are denied, delayed or settled for a fraction of the insured damages.
It’s hard for the average business owner or homeowner to fight back against companies with seemingly infinite time, money and experience.
What can you do to protect yourself?
• Review your policy: Does it reflect increased property values? Does it pay the price to repair or replace your damaged property without deducting for depreciation, or does it only pay the depreciated price to repair or replace your damaged property? Are you covered for all perils or only a select few?
• Update your policy: Make changes if necessary and get quotes from other insurance companies. Your current provider has no incentive to compete for your business. Insurers have also learned it does not benefit their bottom line to keep their insureds for years and years like they did decades ago.
• Prepare for storms and prepare to fight if you make a claim. One way to do both is with documentation. Photograph your property before storm season starts and after any improvements or modifications, and document damage immediately after a storm. Keep detailed notes of your communications with your insurance company and all expenses incurred associated with the storm.
The current financial storm is likely to result in more valid claims being denied. People insure their property so they can recover from damages and move forward. Getting a fair and timely settlement for proper claims is essential, especially in difficult economic times.Chad Wilson Commentary: Financial turmoil puts property insurance claims at risk.
Chad T. Wilson is an attorney whose firm specializes in property insurance disputes.
Chad T. Wilson